Gentlemen, start your trading bots. Things are about to get crazy.

On Wednesday morning, Perseus Telecom and Atlas jointly launched their new high-speed trading platform for Bitcoin and likely other cryptocurrencies in the future. Perseus is a firm that specializes in high-speed financial data networks, while Atlas is a relative newcomer to the Wall Street scene since starting in 2013.

Further Reading

The platform's debut puts Bitcoin trading much closer to the modern world of automated and secure trading. Atlas deals will have a matching speed of 30 millionths of a second. Modern trading firms colocate their systems as physically close to the “matching engines” as possible as a way to gain a few milliseconds of edge over others.

The two firms have founded what they call the “Digital Currency Initiative,” aimed at creating a set of industry-wide guidelines. The end goal is to reach “high precision trading standards executed each day by leading market makers, hedge funds, and investment banks.”

The new Atlas platform has already been running as a “soft launch” for some time now, Atlas CEO Shawn Sloves told Ars.

Sloves also noted that this new platform was not accelerated by MtGox's demise.

"[Perseus and Atlas'] backgrounds both on the trading infrastructure and the telecom side has been servicing ultra low latency clients, it takes years of capital and experience to achieve this type of setup," he said. "It cannot be replicated overnight or in a short period of time. This is an incredible achievement by both our companies. Regardless [of whether] MtGox failed or not, we went ahead and built this out. Our client focus is not necessarily users who had accounts at MtGox."

“I expect that this will help make more transparent liquid markets”

Bitcoin industry watchers say that this marks a notable turning point in the digital currency’s evolution.

“I expect more robust Bitcoin exchanges to emerge and replace the existing set of incumbents,” Gil Luria, a Bitcoin analyst at Wedbush Securities, told Ars by e-mail. “The new exchanges will be either venture capital-backed or units of existing financial institutions. That means they will have the resources to build robust platforms that are scalable, secure, and compliant. I expect that this will help make more transparent liquid markets for Bitcoin and its derivatives, which will translate to less price volatility and better utility for Bitcoin businesses.”

In an investor’s note released last month, Luria wrote that he is largely bullish on Bitcoin. Wedbush noted that it “will be accepting Bitcoin on a limited basis for previously published reports on the topic of cryptocurrency.”

Luria wrote:

More important, we see signs that entrepreneurs and developers are swarming to the Bitcoin platform (page 2). We see this as the best indication of the potential for Bitcoin as these developers are allocating their most valuable resource—development hours. We found nearly 3,000 Github repositories, double from six months ago, which was double from the previous six months. We believe nearly $86 million of venture funds have been invested in Bitcoin companies, mostly over the last 12 months, which does not include the >$200 million and counting we believe have been invested in mining equipment.

James Angel, a visiting finance professor at the Wharton School at the University of Pennsylvania, told Ars by e-mail that Atlas’ new platform debut is “not surprising.”

“With the interest of respectable [venture capital firms] and financial firms in Bitcoin, it makes sense for existing vendors of exchange services in other assets (like Atlas) to offer Bitcoin,” he said. “If you have a good trading platform that can trade currencies, it is pretty easy to add Bitcoin. Thus, it is a low-cost venture for an outfit like Atlas to do. By locating in the industry-standard data centers such as Equinix where the other financial players are located, they make it easier for mainstream financial industry participants to connect."

“Atlas claims to perform transactions in 30 microseconds, which is roughly the same speed as the best equity exchanges in the US," Angel said. "This kind of speed will allow electronic market makers to provide liquidity, lowering bid-ask spreads. Also, it will permit firms that scrape news feeds electronically to respond very quickly.”

The biggest takeaway from the Atlas news? The new platform may finally be a sign that Bitcoin’s freewheeling, anonymous, crypto-libertarian days are coming to an end.

“Wouldn’t you place your bitcoins at a place where the transactions are more likely to be honored?” Ivo Welch, a finance professor at the University of California, Los Angeles, wrote to Ars. “There is an irony here. Bitcoins exist to avoid institutions, and now we will have institutions.”

Cyrus Farivar
Cyrus is a Senior Tech Policy Reporter at Ars Technica, and is also a radio producer and author. His latest book, Habeas Data, about the legal cases over the last 50 years that have had an outsized impact on surveillance and privacy law in America, is due out in May 2018 from Melville House. He is based in Oakland, California. Emailcyrus.farivar@arstechnica.com//Twitter@cfarivar

There's obvious arbitrage opportunities given the different exchange rates at different bitcoin exchanges. I don't know if the blockchain can hold up in a high frequency trading scenario (where millions of trades are made by one firm in a day), but I guess we're going to find out quickly.

Edit: this was a crummy joke, so I removed it. The gist was a somewhat-accurate portrayal of Wall St only being interested in something once it was proven you could really fleece people with it (as has happened at Mt Gox).

The next step will be options, futures, swaps and other derivatives. This is the end of BTC as anything remotely like a currency. With BTC being so limited in number, corruption and manipulation will be the order of the day, with traders having access to HST platforms reaping the benefits to the detriment of actual BTC holders.

These guys will be ablt to assign BTC to each player themselves, based on incoming investments, and only commit to the blockchain when needed for withdrawels, which will be never since they will want to create churn on the exchnage in perpetuity. In the end, the blockchain will become a cutesy remnant of what it was, since the amounts in the ledger accounts of the exchanges will be tracked.

Actually yes (to the second part). The HTF bots buying and selling stocks on extremely short timescales are responsible for driving down the spread between the price brokers offer to buy and sell stocks because they're making many more transactions and thus need to earn less from each to cover their costs and because by providing a continual stream of buyers they reduce the brokers risk from prices dropping while they're holding the security between trades.

Yep. I think some people have missed the whole point to Bitcoin. In my opinion, people's attention was drawn to it when the value shot up late last year. I don't think Bitcoin would be something people would want to dump a lot of money into for investment purposes.

Actually yes (to the second part). The HTF bots buying and selling stocks on extremely short timescales are responsible for driving down the spread between the price brokers offer to buy and sell stocks because they're making many more transactions and thus need to earn less from each to cover their costs and because by providing a continual stream of buyers they reduce the brokers risk from prices dropping while they're holding the security between trades.

While I don't intend to be lazy in my rebuttal, there's simply too many articles on Zero Hedge that dispel the "constructive" perspective of HFT. I'm usually bothered by their "The End Is Near" overall tone, but when digging specifically into a subject, they do quite well. See: LIBOR.

If bitcoin isn't going to die, that only leaves one sure thing left to happen, right?

Quote:

I If bitcoin is a capital asset like a stock, says David Shapiro, a principal at PricewaterhouseCoopers in Washington, then long-term capital gains and losses—those on assets held for more than a year—would qualify for a top federal rate of about 24%. But losses above $3,000 could only be deducted against other capital gains.

If, on the other hand, bitcoin counts as a currency (like euros or yen), then gains will be taxed at federal rates on ordinary income up to 43.4%, Mr. Shapiro says, and losses will be fully deductible against ordinary income like wages.

Hmm, 30 milliseconds to post a transaction, and then 12 hours to wait for 6 confirmations? How in the world is HFT going to coexist with the blockchain verification step?

It's more about guaranteeing the price you want. The clearing end of it will still take the same amount of time. Granted this only matters when the price fluctuates frequently.

edit: a word

That would seem to leave you wide open for massive market manipulation shenanigans.

Just as an observation, hasn't this pretty much been the case with Bitcoin and its price for a while now? In which case, this news won't affect the current situation at all. It will just be business as usual, just with more trading bots and Wall Street.

Hmm, 30 milliseconds to post a transaction, and then 12 hours to wait for 6 confirmations? How in the world is HFT going to coexist with the blockchain verification step?

The thing about the markets is that this sort of manipulation already happens on a wide scale within the microcosm of each exchange. You have to remember that the exchange itself is a subset of the whole market, and can operate independently of the blockchain before having to reach out and affect the market as a whole. Once a person's money and/or coins are within the digital confines of the exchange, they can be manipulated at will without having to pay the confirmation penalty. All exchanges currently work on this principle - with the exception of Mt.Gox, they won't deal in liquidity outside the realm of their own wallets. Transactions within the exchange will happen as fast as the exchange allows them to happen.

HFT already exists on current coin exchanges, though not quite "Wall Street Grade" HFT as of yet.

The only thing this announcement serves to do is potentially put the suits into the market full time now, maybe, assuming these companies really have any leverage with Wall Street.

Hmm, 30 milliseconds to post a transaction, and then 12 hours to wait for 6 confirmations? How in the world is HFT going to coexist with the blockchain verification step?

It's more about guaranteeing the price you want. The clearing end of it will still take the same amount of time. Granted this only matters when the price fluctuates frequently.

edit: a word

That would seem to leave you wide open for massive market manipulation shenanigans.

Which is why financial and commodities markets are highly regulated. HFT doesn't make sense at all considering the spirit and implementation of Bitcoin.

At this point the spirit behind means little since they wanted to avoid the kind of control that could stop anything like this. Besides the main thing allowing it is the natural volitility of currencies, that hacks or regulatory decitions like recent weeks can have large swings in exchange rates and what looks like some speculation going on.

BitCoin still serves its purpose because the institutions aren't mandatory. For the people avoiding institutions, they will still be able to do that.

There is no way for a consumer equipped with a laptop (or a tablet, phone) add a transaction to the blockchain without going through a transaction processor of some kind. Once this transaction processor is no longer satisfied with mining rewards, he will charge increasingly large fees to cover the energy costs behind transactions, and profit. A one satoshi transaction costs as much to get verified as a one bitcoin translation. The peer-to-peer nature of bitcoin is ruled by increasingly powerful peers.

So the two big-time Wall Street firms are both, umm, startups? Atlas was founded in 2013. Perseus goes back to 2009 (according to Bloomberg), but looking at the "News" section of their website, there's a lot of "announcements" and speaking engagements and hiring announcements -- but very few actual business deals or transactions.